Estate planning is generally seen through the eyes of the person creating a will. Less discussed is the perspective of beneficiaries. What can a beneficiary expect? What are some common questions to ask? Below are some recurring issues that we have seen being raised by beneficiaries from time to time.

Fair Treatment

Did I receive what I expected to receive under the will? Was it fair?

What is fair is in the eyes of the beholder. A testatrix has the ability to decide how to divide her property including the right to provide beneficiaries with unequal distributions. A general guiding principle is that individuals are free to dispose of their estate property how they see fit. Notwithstanding, drafting lawyers often recommend documenting the reasons for an unequal distribution to help defend or refute will challenges that may be brought on by beneficiaries who are unhappy with a distribution scheme.

There are, however, limits to testamentary freedom. An estate may, for example, have an obligation to adequately provide for a person who was financially dependant on the deceased person.¹ The deceased may satisfy such an obligation to make sure a dependant is adequately provided for either through a will or otherwise.

Certain jurisdictions, in particular British Columbia, have further limited the doctrine of testamentary freedom through the concept of moral obligations. Moral obligations are based in part on what a person would do in the circumstances based on society’s reasonable expectations, and they have the potential to be broader in scope than support for financial dependants.²

Executor Compensation

A common remark from a beneficiary is that the testatrix would never have appointed XYZ as executor if they knew how much XYZ would charge. In the case of a lay executor, unfortunately, compensation is rarely discussed prior to the person’s passing. So, what the testatrix would agree to is a really a moot point. It is also not unusual for a lay executor to discover “on the job” how difficult and time consuming the role can be. As a result, they may feel their time and effort should be more highly compensated than the beneficiaries—who likewise have little sense of the role—expect. A lay executor might also use an atypical method to calculate fees, which may confuse beneficiaries and exacerbate the issue.

In appointing a trust company as executor, the fee calculation method is fully disclosed in a written compensation agreement. The agreement is explained to the testatrix and signed to signify their understanding and acceptance of the cost to their estate.

Another frequent beneficiary comment is that they could easily have done a better job than XYZ and would have charged less or nothing to do the ‘job’. An executor is entitled to fair compensation for their time and trouble, and the factors that go into determining how much is reasonable are well established by courts.

All executors, lay or professional, can claim similar compensation. It is true that many executors are also estate beneficiaries and therefore feel obligated to work for free. We advise every lay executor to charge what they think is fair and reasonable for their work.

Conflicts of Interest

Executors must recognize and avoid conflicts of interest. Executors have a fiduciary duty to act in the best interest of beneficiaries and must put the beneficiaries’ interests ahead of their own. This can become a real problem when the executor is also a beneficiary. In fact, recognizing the conflicts of interest a family member will face as an executor—and the very real challenges of resolving them with other beneficiaries—is sometimes why people choose to appoint a trust company as an unbiased executor.

Here are a few conflict-of-interest situations:

• When an executor is interested in purchasing an asset from the estate, such as the family cottage, art collection, or car. All such transactions should occur at fair market value and be authorized under the terms of the will. What if the will says nothing? Then our default recommendation is that an executor avoid buying estate assets or take legal advice before doing so.
• When an executor is a shareholder or co-owned a business with the deceased. The executor may feel that as part owner they are not accountable to the beneficiaries. In fact, if the business is part of the estate, the executor has a duty to maximize the asset value the beneficiaries ultimately receive.
• Sometimes the executor has also acted under a power of attorney for the deceased person. Other beneficiaries may perceive that they have taken advantage of that position of trust.

It is important to remember every executor is legally accountable to the beneficiaries. If a beneficiary has concerns about a conflict of interest, they have the power to demand that an executor provide a formal accounting to the court. This mechanism provides the opportunity for the beneficiary to express their complaint, the executor to defend their actions, and a judge to determine what is fair. Of course, this procedure can be expensive, so it is advantageous to resolve the matter before it gets to court.

Communicating Clearly

It is the simplest concept, but experience says it is one of the toughest things for parents and children or testatrixes and beneficiaries to do. And that is to talk: As parents, talk about your wealth transfer plans, share your thinking and decisions. As children, raise concerns that may or may not surprise your parents.

Will it necessarily always go smoothly? No. But the issues raised may help lead to some solutions unfolding now versus problems emerging in the future.

 

 

 

1. Determining who qualifies as a dependant will require a review of the applicable provincial or territorial legislation.
2. A fulsome discussion of the concept of moral obligations is beyond the scope of this article. A review of court decisions with respect to wills variation claims made under the British Columbia  Wills, Estates and Succession Act, SBC 2009, c.13 will provide a detailed explanation of this concept.